Definition
The term income fund refers to a portfolio of securities that are expected to provide investors with a reliable source of monthly or quarterly income. These funds may consist of bonds, money market funds, as well as equities that pay relatively high dividends.
Explanation
Also referred to as fixed income funds, income funds specialize in holding securities that will provide investors with a reliable source of quarterly or monthly income. This is accomplished by purchasing common or preferred stock with relatively high dividend yields, in addition to fixed income securities such as money market funds and debt obligations.
Lower risk funds will hold debt securities, such as bonds, that are of investment quality. This approach helps preserve capital when interest rates are falling. Higher risk funds may hold bonds that are not of investment quality, commonly known as junk bonds. While the yields on these debt obligations will be higher, the risk of default is higher too.
Investors choosing income funds will typically have relatively low risk tolerance scores, since their investment objective is the preservation of capital and a reliable source of income. While the value of these funds can be expected to underperform during a bull market, they can also be expected to outperform during a bear market, thereby exhibiting below average volatility.
Related Terms
- The term value fund refers to a portfolio of stocks that are deemed to be undervalued by the market. The objective of a value fund includes not only providing investors with capital appreciation, but also a steady stream of dividends.
Moneyzine EditorNovember 6th, 2024 
The term emerging markets fund refers to a portfolio of securities originating from one or more developing countries. The objective of an emerging markets fund is to provide investors with higher than average returns relative to those available in what are considered developed or industrialized countries.Moneyzine EditorNovember 6th, 2024
The term global fund refers to a portfolio of stocks and fixed income securities issued by companies and governments around the world. The objective of a global fund is to provide investors with a hedge against inflation, and take advantage of geographies offering faster growth than found domestically.Moneyzine EditorNovember 6th, 2024
The term balanced fund refers to a portfolio of stocks and fixed income securities that do not change their asset mix over time. The objective of a balanced fund is to provide investors with both capital appreciation as well as income.Moneyzine EditorNovember 6th, 2024- The term sector fund refers to a portfolio of securities issued by companies that operate in a specific industry or segment of the economy. The objective of these funds is to provide the investor with the opportunity to diversify within the sector.Moneyzine EditorNovember 6th, 2024
